Market Update

There was some mixed news over the last month. Mostly positive but, or course, there are some who think that our next crash is eminent. I lean on the positive side of things, especially after reading that consumer confidence continues to rise. This index is based on a survey, which is not always accurate, but the idea of consumer confidence is the best piece of data to judge the economy, in my opinion. When there is confidence, consumer’s borrow and spend money, which creates a strong economy and more confidence. It really is a domino effect. According to the University of Michigan and Thompson Reuters, who conduct a confidence survey, consumer confidence is at its highest post-recession level. According to the survey, consumers have an optimistic outlook on the overall economy and their personal income levels.

It is also worth mentioning that based on a survey sponsored by Zillow, consumer confidence is not the only index on the rise. The latest Housing Confidence Index is on the rise and indicates consumers have an overall positive feeling about the housing market.

According to Fannie Mae, the economy will continue its recovery at least through 2015. Foreclosures are way down. Fannie Mae’s list of defaults is at its lowest level in six years, and residential foreclosures, according to CoreLogic, are down across the nation by almost 33% year over year. Finally, unemployment hit the lowest level since 2008. All this tells me one thing... Our economy is thriving.

Of course, the Fed is aware of how well the economy is doing and continues its bond buying cuts. Over the last two years, our government has been purchasing debt and keeps liquidity high and rates low. Basically they were just printing money each and every month. The strategy worked well and interest rates have been at all time lows. With the economy improving and the risk of inflation increasing, the Fed wants to pull out of the bond buying business. The Federal Reserve has agreed to further reduce the amount of bonds being purchased, and even hinted that the end is near. If things remain on the current path, we might see the program end as early as this month. I feel it will continue to be gradual, but there is little question that rates will be on the rise.